UCITS hedge funds have witnessed significant growth since 2007 as managers have continued to attract investment interest from insurance companies, pension funds and other institutional investors. As illustrated in figure 1, assets in UCITS compliant hedge funds have expanded nearly threefold with 912 managers overseeing US$190 billion of capital as at end-February 2012.
Figure 1: Industry growth since December 2007
The UCITS III framework, introduced in 2001, laid out various directives that allowed managers to use a wider range of techniques and instruments to help balance the trade off between portfolio risk and return. That framework has since been improved with the UCITS IV directive implemented in the middle of last year. UCITS IV facilitates cross border fund distributions, reduces costs, achieves regulatory alignment, decreases administration burden and achieves economies of scale for the fund management companies. As investors focus more on risk management practices and fund transparency...
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